High hopes, low growth

High hopes, low growth

The uproar in Parliament over Balco supplies one more item to the list of short and long term constraints to growth cited in this year's Economic Survey. The lack of political consensus on major reform measures could prove as much of a drag on growth as infrastructure bottlenecks or high interest rates unless politicians find more efficient ways to manage differences of opinion. The negative reaction to the sell-off of 51 per cent of the government's stake in the aluminium company is disconcerting because it could have been anticipated and prevented. It is not only the largest disinvestment measure in the year but also a forerunner for a host of other big ticket sell-offs of public sector undertakings to strategic partners. If the government took a little more trouble to communicate with the Opposition and the latter adopted a more responsible stance, there would be fewer disruptive tactics in Parliament and more informed debates on the reform agenda.

Informed debates are needed to help the government arrive at and implement difficult decisions in a number of areas in order to improve immediate and longer term growth prospects. Reform of agriculture is a priority. The Economic Survey confirms that foodgrain production is down. This is not cause for immediate concern because the government's godowns are groaning with stocks of rice and wheat. But future growth can be ensured only with structural change including lifting restrictions on inter-state movement of foodgrain and exports, and encouraging agri-business all of which the Survey endorses. It also recommends changes in the subsidies structure in sectors such as fertiliser and sugar. All change hurts some interests somewhere and an election-focussed government is likely to be highly sensitive to any signs of resistance from farmers and their lobbies. While fiscal measures in the next budget can stimulate some change, it is really up to the government working with the Opposition to see that long-delayedreform policies for agriculture are adopted with the minimum of controversy.

The slowdown in industrial growth in the first nine months of the financial year is marked, a fall to 5.7 per cent from 6.4 per cent in the same period last year. The Survey provides some pointers to the kind of intervention the finance minister could make next week to boost industrial growth and also to sustain export growth which has been one of the brighter spots in the economy during the last year. Confidence in future growth prospects of the economy will lead to higher capital investment and spur capital goods production. One way of creating that confidence would be by making a determined effort to curb government expenditure and the fiscal deficit. Industry has heard the mantra of policy changes to hasten the building of power plants, roads and ports once too often. Another year has gone by and power sector growth remains disappointing. Words must be translated into action soon to revive business confidence. As the Economic Survey emphasises this is a critical juncture for the economy. The prospects forhigher growth are good but there are worrying signals at home and abroad which call for quick responses from the government and business and industry.